Probe into Princess-Royal merger

THE proposed $7bn (£5bn) marriage of P&O Princess Cruises and competitor Royal Caribbean was today referred to the Competition Commission amid Government fears about the merged group's potential market dominance.

The referral was widely expected, as reflected in the fall of only 2p in Princess shares to 397p. But the findings, including any requirements for the pair to shed some parts of their business in order to win regulatory approval, could be crucial to the outcome.

Trade Secretary Patricia Hewitt said she believed 'there were sufficient concerns surrounding this merger' to warrant an investigation.

Princess, which is the world's third-biggest cruise provider, has refused to say what the merged group's market share would be.

The commission's findings could also have a significant impact on the competing £3.5bn bid for Princess by United States cruise group Carnival.

Carnival, which has argued that its deal will not meet regulatory opposition, is to be studied by the competition authorities in Brussels. However, it is yet to file an application, meaning it is unlikely to get an answer before the British authorities finish studying the Royal Caribbean deal.

Princess said today it believed its deal with Caribbean would be approved. 'We are confident we will receive clearance once the commission has fully reviewed the substantive facts and issues surrounding our combination with Royal Caribbean,' said Princess chief executive Peter Ratcliffe. Princess shareholders are due to vote on the merger on 14 February.